strategy - Strategic Planning Society

Transcription

www.sps.org.uk
strategy
JULY 2013 I Issue 30
MAGAZINE
Exploring strategic
thought & action
Lessons in
strategic
transformation
Changing a successful model
prior to financial decline
Hensmans,
Johnson and Yip p10
Philip Whiteley and
Neela Bettridge p14
A.G. Lafley and
Roger Martin p22
Information.
Intelligence.
Networking.
Becoming a member
We offer a range of
membership types
For further details on
membership and more
information about SPS
please contact us at:
Strategic Planning Society,
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124 New Bond Street,
London, W1S 1DX, UK
T: +44 (0)845 056 3663
E: [email protected]
W: www.sps.org.uk/join-sps
Join our international community of strategists
THE SOCIETY
Formed in 1967 as the Long Range Planning Society in an era of relatively limited change and
much lower complexity of economic activity, the Society recognised the evolving field of strategic
management, and planning as an important constituent. We became the Strategic Planning Society
(SPS) in the late 1970s.
SPS was registered as a charity in 1968 and remains an education charity; a not-for-profit,
membership organisation with a global network. We have a long-standing reputation for insightful
contributions to strategic management with a strong legacy and valued brand worldwide.
Our Vision and Our Mission
SPS is dedicated to the development of strategic thinking, strategic management and strategic
leadership.
We support our Members in developing strategic management and leadership capabilities, sharing
knowledge, best practice and opening up the debate, and in creating a global network of senior
strategists.
Our Members
SPS Members and Fellows currently cover over 20 countries in the world. Our Members range from
individuals, corporate organisations and business schools to governmental institutions and policy
makers. As well as the Member benefits below we have special agreements for Corporate Members,
who can take advantage of:
• reduced rates for a selected number of employees
• usage of our SPS logo online, in print, on a wall plaque and for other applications
• free job listings on the SPS website, in our e-newsletter and other channels such as LinkedIn
• publication and promotion of research and papers by SPS on our website and other media channels
such as LinkedIn
fellowship
To be a Fellow you have to complete an application which has to be approved by the trustees. Being a
Fellow will give you:
• post-nom title ‘FStratPS’ as recognition of your professional status, with a certificate of SPS Fellowship
• publication and promotion of research and papers by SPS on our website and other media
channels such as LinkedIn
• the opportunity to be part of a special Fellows programme, currently in development
LONG RANGE PLANNING
Six times a year members receive the leading international strategic planning journal; academic in
flavour, but with practitioner techniques offered.
Strategy Magazine
www.sps.org.uk
Members receive our acclaimed magazine, dedicated to helping practitioners improve their strategy
formulation and implementation.
www.sps.org.uk I Issue 30 I July 2013
Strategy Magazine
Contents
SPS editorial
Editor’s column
4
Mark Wellings
News & events
5
The annual general meeting heralds a new
dawn for the SPS.
Fiona Carter, new SPS CEO
The new SPS Board of Trustees
7
Spanning the worlds of business and academic
strategy, the new SPS Board of Trustees have
the expertise and experience to take the
Society’s initiatives forward.
Robert Perrin, first SPS Chairman 8
6
Fiona Carter, the new CEO of SPS, has had long
experience of strategic thinking, and is looking
to help strengthen the position of the SPS. She
explains how the current climate is conducive to
a strategy renaissance.
Robert Perrin, the first SPS Chairman, elected
in 1967, founded SPS (then the Long Range
Planning Society) in a time of uncertainty. He
talks about the roots of the Society and the
importance of strategy then and now.
Features
Lessons in strategic transformation 10
Customer-centric survival
Manuel Hensmans, Gerry Johnson
and George S. Yip
Lior Arussy
18
Companies able to transform have the unusual
ability to change their success model prior to
financial decline. Support from the top means
this ability is eventually institutionalised as
examples from three top companies show.
At a time when every customer can empower
decision-making with a smartphone, and when
price comparison is just a click away, becoming
more customer-centric is vital. Only a wellexecuted and actionable strategy can ensure
survival in this new reality.
Think big, think deep
Playing to win
14
22
Philip Whiteley and Neela Bettridge
A.G. Lafley and Roger Martin
The failures that contributed to the global
economic crisis have exposed the inadequacies
of the current business model. Reform will
require deep, as well as different, thought.
A strategy is a coordinated and integrated set
of choices that make up the strategic choice
cascade as the successful re-launch of a flagging
brand shows.
strategy
Published by Grist
Publishing director Mark Wellings
Managing editor Sam Campbell
Art director Andrew Beswick
Proofreader Alan Friedler
Commercial director Andrew Rogerson
T: +44 (0)20 7434 1447 W: www.gristonline.com
Advertising and sponsorship Fiona carter
([email protected] or [email protected])
Strategic Planning Society
New Bond House
124 New Bond Street
London, W1S 1DX, UK
Grist is a B2B content marketing agency using print, digital
and video. We create integrated communications campaigns
that help our clients develop closer relationships with their
clients.
Strategy Magazine is published by the Strategic
Planning Society for the benefit of its members.
T: +44 (0)845 056 3663
E: [email protected]
W: www.sps.org.uk
MAGAZINE
3
4
Strategy Magazine
Editor’s
column
T
Mark Wellings
Editor, Strategy Magazine
SPS Publications Chair
+44 (0)20 7434 1447
[email protected]
hrough adversity often comes strength. The
financial crisis and subsequent economic
downturn, which continues to linger, have
changed the nature of business and, thus, strategy.
Organisations struggling through straitened
circumstances found themselves forced to economise.
However, with most of the easy efficiency savings
already made, strategic thinking is needed to retool for
the new reality.
Yet, in the era of credit-fuelled growth and easy
money preceding the crash, strategy often slipped
off the radar. The carefully crafted five-year plans of
previous decades were dropped, disdained as too rigid.
Looking for a tool to cope with a more unpredictable
world, many are returning to strategy. But strategy
itself must also change, bridging the gap between
the theoretical world of academia and the pragmatic
(but sometimes short-sighted) approach of business.
Strategy in the twentieth century, dominated by
theory and characterised dry, analysis-driven planning
processes, often failed to yield the expected results.
SPS is at the forefront of this strategy renaissance,
moving beyond its UK roots (see page 5) to become a
global, digital-focused organisation. A new Board (see
page 7) is helping drive this approach, which as SPS
CEO Fiona Carter explains on page 6, is bound up with
strategy’s important role.
Indeed, the business models, and so the strategies,
of the past look ever more obsolete, based on
outdated assumptions of stability and limited
globalisation. On page 14 Philip Whiteley and Neela
Bettridge investigate the weaknesses in the current
business model stemming from taken-for-granted
assumptions. The current way of doing things is not
fit for purpose, based on double-entry book-keeping,
inaccurate zero-sum economic theories from the
eighteenth and the nineteenth centuries and the
assumption that natural resources are infinite in
supply, they argue.
Part of the new way of thinking about business
could be to put the customer at the centre of strategy,
Lior Arussey claims on page 18. Customer centricity
is included in practically every mission statement, he
finds, but relatively few companies take the concept
seriously. Scandals such as the recent revelation of
foods adulterated with horsemeat show the potentially
serious consequences of chasing profits at the
expense of customer preference. And with pluggedin customers increasingly vocal about even minor
dissatisfactions, slip ups do not need to be serious
to have a noticeable impact. True customer-centric
companies, Arussey says, are naturally evident through
their actions, customer loyalty and profitability.
Further lessons in strategic transformation are
offered by Manuel Hensmans, Gerry Johnson and
George S. Yip, who look at companies that moved
successfully to a new model without a crisis that
triggers the need for change. The principles of
building alternative coalitions with management,
creating a tradition of constructive challenging to
business as usual, and exploiting ‘happy accidents’ can
create a virtuous cycle of strategic transformation that
can help companies pull ahead of their competitors in
an inhospitable business environment.
Despite the shift in approach, the end goal for
business necessarily remains out-competing others,
although staying ahead of the curve is difficult, and
catching up after falling behind even more so. Making
use of a well-known real-life example, A.G. Lafley
and Roger Martin look at how a flagging brand can
be relaunched. Their analysis shows how strategy can
be thought of as a coordinated and integrated set
of choices that make up a strategic choice cascade,
demystifying strategy into a set of five important
questions that can (and should) be asked at every level
of a business.
Events
September 2013
BAE Systems Strategic Breakfast Briefing
With the global view continuing to look rather bleak,
both within the Eurozone and further afield, where
are the growth markets – and how can UK exporters
seize the opportunities they present? And what can
the UK offer countries that wish to industrialise, but
on their own terms?
This FT Strategic Breakfast Briefing, in
association with BAE Systems, will provide a bird’seye view of the export landscape, and will look at
what UK business must do to improve performance
overseas and secure the high-value contracts in the
very competitive markets of the emerging world.
Date: 3 September, 2013
Location: Pearson Head Office, London
Details: www.ft-live.com
SPS webinar: Strategy implementation
The latest in a series of engaging webinars explores
the issues around strategic implementation. If you
are a Member of SPS you will receive an invite
closer to the date to join, via your email address.
If you are not receiving the invites on this series,
please email us at [email protected].
If you are not a Member but would like to join
to be a part of these SPS Webinars, please visit our
website to find out how
Date: 19 September, 2013, 16.00–17.00
Location: www.sps.org.uk
Fourth annual Lean Government conference
The fourth annual Lean Government conference will
offer practical sessions showcasing lean thinking
in a public sector setting, sharing experiences
and best practice. Delegates will receive an
understanding of lean and its principles, a review
of efficiency and lean initiatives in the public sector
and lessons learned, and a range of case studies
from central government, local government and
the NHS. This event is therefore ideal for forwardthinking managers who possess a public service
ethos and who put the interests of both their staff
and the public at the top of their list of priorities.
Date: 20 September, 2013
Location: The Barbican, London
Details: www.publicserviceevents.co.uk
October 2013
Executing Strategy in a Changing World Global
Summit
Palladium’s Annual Global Summit, Executing
Strategy in a Changing World, will discuss issues
related to one of the most vexing challenges facing
senior executives today: managing successfully
through market disruptions. Learn from established,
world-renowned experts who have been a powerful
force in shaping management thinking in a setting
that blends business with academic thought.
The summit brings together public, private, and
government leaders and executives responsible for
leading strategy execution for their organisations.
These executives drive innovative change, seek
new solutions to realise future value, and, most
importantly, provide the visionary leadership to
effectively guide and align their organisations to
make better decisions.
Date: 30–31 October, 2013
Location: Boston, US
Details: www.thepalladiumgroup.com/events
Strategy Magazine
News
AGM outlines a new vision for SPS
The annual general meeting held on 4 June laid out a new vision and bright future for the
Society. Following a welcome from Neil Hampson, the head of strategy at PwC, who kindly
hosted the event at its London Head Office, the event was an opportunity for the new board
of Trustees to give an overview of the current situation of SPS and outline the strategy for
the future.
In a joint statement, the Trustees want made clear that SPS is now in the midst of a
turnaround. “We need to create modern, relevant value propositions for our Members and
develop initiatives which will engage our worldwide community of strategists,” said Fiona
Carter, the new CEO of SPS. “This will improve the revenues of this charitable organisation
as well as services to members and communities. There are clear and encouraging signs
that SPS has a viable and important role.”
SPS plans include expanding its business schools programmes, initiating a Fellows
programme, offering discounts to Members on events, enhancing communications with
a focus on learning and development and expanding international partnerships and
memberships.
Proceedings
The Treasurer’s report presented at
the AGM found that the independent
examiner had given the accounts a
clean report, that the cash base of SPS
is stable and that the Society is “on a
springboard to growth”. The accounts
were passed by a vote.
There followed a vote, which was
passed, on the updated articles of
association, which represented the
first stage of a planned process, with
changes to the terms of Trustees and the
Chairman (maximum two terms), and
methods of communication, meetings
and membership administration. The
existing memorandum of association
has been imported unchanged, although
the board will review the objectives of
SPS in 2013–4, consulting members
and then seeking the approval of the
Charity Commission. The new articles
can be viewed at www.sps.org.uk.
The new Trustees were introduced
(see page 5) before the Trustees’ Annual
Report was presented by Fiona Carter,
the new CEO of SPS. The evening was
rounded off with networking drinks.
Global SPS goes digital
To stay in line with strategy’s changing nature and role, the SPS is looking to enhance its
digital resources needed to reach out to members spread across the world.
A series of engaging webinars have already proven to be a success with topics including
innovation, brand transformation, globalisation, strategic decision-making, sustainability
and global trends in strategy consulting, and will be expanded, with future topics including
strategy implementation, gamechanging strategy, talent and careers and marketing strategy.
The recordings of these SPS webinars are available on the Member Zone of the SPS
website: www.sps.org.uk/member-area.
The SPS LinkedIn group, which now have almost 17,000 subscribers, is also a key
component that will transform how SPS communicates, connects and operates.
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Strategy Magazine
Interview:
Fiona Carter, SPS
Fiona Carter, the new SPS chief executive officer, discusses her thoughts on
strategic thinking and the future of the Society.
What do you think is the role of
strategy?
With the economic downturn and
recession, strategy is coming to the
forefront again, after slipping down
in importance during the dotcom era.
Years ago we used to have ten-year
plans. In fact, when SPS started up in
1967, it was originally called the Long
Range Planning Society (see page 8).
With the dotcom era, the
instability and movement of the
markets, globalisation and more
immediate communication, strategy
became more like a one-year plan.
Now, attempts to build the economy
back up mean that people are looking
at business strategy for three years,
and scenario planning is coming to
the forefront.
For example, one of the big
international banks had a strategy
department around five years ago
which then was disbanded. A new
strategy department has again now
been put in place as it was keenly felt
strategic thinking is important for the
future of the bank on a global level.
Thus, strategy is becoming ever more
important.
Developing skills for our Members,
through learning and best practice is
important to strengthen and enhance
their roles in business, and this is what
SPS’s Vision (a dynamic, global strategic
management community) and Mission
(improving the practice, development and
recognition of strategic management) is
all about. Being a member of SPS shows
a professional standing and a focus on
strategy.
What else is changing at SPS?
What are the current weaknesses
in the way that strategy is
practised or perceived?
I think the word strategy is sometimes
overused. Strategy has to be a thinking
process of the future of a business at a
very deep level. A single organisation
will have an overall business strategy,
with its various business units having
individual strategies aligning to this;
such as IT, marketing, HR, finance, etc.
One of the focuses of SPS is learning
and development; developing strategy
practitioners as part of their career.
This year we initiated a programme
of monthly SPS Webinars. I recently
chaired one on Global Trends in Strategy
Consulting with around 177 participants
from all over the world; as far afield as
Mexico, Brazil, Australia, the US and
India. There is a real interest among
people to understand more and our
international network is coming to the
forefront.
How far has a gulf between
strategy in academia and in
business contributed to the
current situation?
There is a lot of valuable work being done
in academia and one of the objectives of
“One of the objectives of SPS is to purposefully
bring together academia and the business world.”
Strategy Magazine
The new SPS Board of Trustees
SPS is to purposefully bring together
academia and the business world.
SPS is a great vehicle for this,
helping to start conversations and
debate. In a recent webinar, for
example, we had a professor from
Cranfield University and a director
from Fujitsu.
Whilst we definitely want SPS to
be recognised by business, I believe
it’s healthy to have a mix of both
business and academia. The theoretical
side is needed to understand where
we are going in the future, but
such predictions also need to take
account of business considerations.
Collaboration between business
schools also gives excellent insight, and
SPS has a business schools programme
to enhance strategic thinking for our
Members.
What is the ultimate aim of the
SPS?
We want to grow our membership
internationally and to share
knowledge and best practice
worldwide. At a country level, we want
to bring networks together. Whilst we
were originally established in the UK
(see page 8), we are now a truly
international organisation. And
through increased membership, we
can only become stronger.
curriculum vitae
Fiona has a Master’s degree in Marketing
Strategy, having experience mainly in
business-to-business strategy through
professional services, where her focus has
been on international strategic business
development and marketing.
She enjoyed 24 years in international and
global roles within
PriceWaterhouseCoopers relating to
strategic entry into new markets and
services, sector strategy and culture change
management.
Fiona has lived in Italy, the US, Switzerland
and more recently worked in the Middle
East for almost three years. She is excited to
work with SPS, growing the membership to
spread the knowledge and expertise of
strategy worldwide.
Laurie Young, Chairman
Laurie Young has expertise in the marketing of services, and has worked
with many different businesses and the charity sector. He has a deep
interest in the development and implementation of strategy.
Laurie has an MBA, has published ten books and a number of articles
on different aspects of strategy, and has advised many large corporate
organisations on strategy, specialising in the development of strategies for service companies.
Mike Abrey-Bugg
Michael Abrey-Bugg has more than 20 years of sales, marketing and
business development experience within major energy companies. Mike
has worked in senior positions Eastern Electricity, British Gas and has
developed commercial strategic business units within Age UK.
Mike aims to ensure SPS takes full advantage of its heritage and
standing on the international business stage, whilst building firm and robust business
processes to develop a strong and sustained future returning value to all stakeholders,
ensuring SPS works as a business, and develops and retains value.
Paulo Alves
Paulo Alves works as full professor in Fundação Dom Cabral (FDC)
and his professional experience includes the government, defence,
aerospace, education and energy sectors. He was ranked 29th in the Best
Business Professor Award by the Economist Intelligence Unit 2012–13.
Paulo aims to contribute a better view of the emerging markets,
particularly in Latin America and to bring a view from business schools to blend the views of
practitioners, academics and consultants.
Chris Hafner
Chris Hafner is an experienced leader in strategy development,
implementation management, and execution across multiple industries,
including consumer products, manufacturing, aerospace & defence, life
sciences/healthcare and energy/utilities. He is currently vice president of
strategy and director of European operations at Newton Consulting.
Chris is committed to seeing the ideas and concepts of SPS through to realisation,
especially advancing the business school programmes and collaboration between Trustees,
Fellows, and Members.
Gordon Mitcheson-Smith – Treasurer
Gordon Mitcheson-Smith has 25 years’ experience in finance and strategy
roles, predominantly in technology-related businesses.
Gordon wants to contribute to SPS progressing toward becoming the
global body for professional strategists by ensuring it delivers value for all
its members. He will seek to ensure that the interests of the public and
third sectors and SMEs are effectively represented.
William Patterson
Dr William Patterson has 25 years of operational, strategy and consulting
experience within major international organisations. He has worked at
Dow Chemical, ICI, Cap Gemini Consulting, and since 2003 has been
managing director of Avison Consulting.
William aims to ensure SPS strengthens and grows in its attractiveness
to new members, linking academic and practising manager/consultants and renewing the
knowledge in both the academic and practitioner communities.
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Strategy Magazine
Interview
Robert Perrin,
first SPS Chairman
Robert Perrin, the first SPS Chairman, elected in
1967, talks about the roots of the Society and the
importance of strategy then and now.
I
n the more than 45 years since the
foundation of the SPS, the world has
changed almost beyond recognition.
Perhaps the most obvious differences
are the fruit of globalisation, a trend that
was in its infancy when the Society was
founded. Indeed, Robert recalls the UK at
the time as being “very backward looking
and not thinking ahead”. He perceived the
potentially massive benefits of applying the
new approach to strategy.
This was a troubled time for the UK;
rapid technological development was
seeing its manufacturing fall behind
competitors such as Japan. These problems
were further exacerbated by powerful trade
unions and their crippling strikes. This
strife in turn was tied up with the state’s
central role in industry.
A fresh approach
These were key considerations in the
foundation of the SPS, which began as the
Long Range Planning Society, giving its
name to an eponymous journal that still
leads the field in strategic thinking.
The story begins in 1959, when an article
on long range planning in the Harvard
Business Review by a consultant for
Stanford Research Institute in California
attracted the attention of Robert, then a
marketing consultant working in Canada.
Stanford Research also ran a
small, special organisation of
approximately 30 graduates
who wrote long reports on
areas of interest, such as the
development of new textiles
or emerging technology. Their
research into the characteristics
of fast-growing firms fascinated
Robert, he says. “I immediately
applied some of the principles to
a client in Canada and it worked
staggeringly well: it was the
birth of Hush Puppies, which
had originally been a failure but
became for a time the fastestselling branded footwear in the
world.”
Robert was not alone in
realising the potential of this
new approach. In 1965 a four-day
OECD conference in Paris tapped
into the growing interest in strategy.
Networking among the 15 British
speakers led to a subsequent meeting
at Robert’s home, where the idea of the
Society started to take shape.
An announcement of the
inaugural gathering was made in the
management magazines of the day but
a far greater than expected response
led to a change in plans. “As there
were 15 of us, we initially expected a
gathering of around 50 in the Institute
of Directors Club. It quickly became
apparent that more people were going
to come so we changed the venue. But
that announcement stimulated even
more interest so we had to change
venue again. Of course, the newspapers
picked up on this as a funny story – the
Long Range Planning Society can’t
even decide where their meeting is
going to be.”
Nevertheless, the meeting “went
very well indeed”, Robert says, helping
to put flesh on the bones of the original
idea. Electing a Chairman was one of
the important responsibilities but the
expected candidate, a well-respected
Cambridge professor, was rejected in
favour of Robert, much to his surprise.
“It was quite embarrassing. People were
saying: ‘We don’t want an academic.
You set up this meeting, now you need
to implement it.’ And that’s why I really
became involved.”
After the first official meeting
in early 1967, the as yet unnamed
organisation officially became the Long
Range Planning Society. As the name
suggests, the Society’s intention was
to promote planning. “I passionately
believed in planning ahead and still do,”
says Robert. “This is a skill that applies
equally to both a local grocer and a
major multinational like ICI. It’s about
minimising wasted and underused
resources, and getting the most out of
management skills.”
Moving forward
The organisation grew “very happily”,
Robert says, investigating thenimportant areas such as manpower
planning, technology forecasting and
programme budgeting. Sometimes
these considerations interacted, he
says – the scientists developing new
technology would leave an organisation
if they felt they were undervalued,
requiring careful consideration of
manpower planning (now thought of
as HR).
“It went beyond marketing plans
and financial projections. We asked
who was looking at technology, and
what was changing. How could HR be
Strategy Magazine
Long Range Planning
The Long Range Planning Society eventually evolved into the
SPS. With an eye on the success of the Harvard Business Review,
Robert Maxwell realised the promise of strategy as a future area
of management expertise. Launched at a party at the House of
Commons, the journal published its first issue in September 1968,
becoming the first journal solely devoted to business strategy.
The first issue of Long Range Planning was billed as the journal
of the Society, and for many decades provided much essential
Tie in: a limited-edition LRP
financial support, credibility and exposure to the Society.
neck tie from the early days
improved both in the workshop and in
senior management? Planning ahead
was needed to involve trade unions in
the future retooling. Looking ahead
and planning was more than market
research. That’s the message we were
preaching.”
Combining a vision – Robert dislikes
jargon like ‘out-of-the-box thinking’ –
with a disciplined, realistic process has
been key in realising business successes.
Building up a body of expertise by
bringing together knowledge from
different areas and getting buy-in from
a senior member of the organisation
were and still are crucial in looking
further ahead, Robert says. “From this
discussion the idea of the corporate
planner was born – someone to ‘keep
the train moving’ with a wide range of
competencies. However, I tried to avoid
claiming that it was a new profession
as that would create friction, instead
choosing to refer to it as a specialist
aspect of management.”
This approach sought to encompass
the public sector and the significance
of this work was picked up by the
Original objectives
• to awaken the need for, and understanding of, long range planning in both the private
and public sectors of the economy;
• to enhance the skills of long range planners;
• to bridge the gap between long range planners in industry, government and the academic world.
cabinet, which engaged consultants,
professors and poured in money to
realise economic reform based on the
findings. One example was greater
encouragement of disabled people
to join the workforce, a policy that
both empowered disabled people
and reduced the weight of care on
taxpayers.
Gaining momentum
The profile of the organisation grew,
with links to the Operational Research
Society and the Manpower Society
(now the HR Society), interest and
membership gained momentum with
individual members paying £5 a year
and corporate members paying £100.
“Companies wanted to encourage
several of their staff members to join”,
says Robert, naming Unilever and Shell
as among those who became involved.
By 1970, membership had reached
1,000 with 755 of the UK’s largest firms
represented. The Society was primarily
UK-focused but there were spin-offs in
Australia, Canada, the Netherlands and
the US, albeit with fewer members and
no dedicated publication.
Robert is pleased with the Society’s
progress in the years since his
Chairmanship. “From the straitened
circumstances of the 1970s to the
rollercoaster of economic
circumstances, there is a need for
management, in all fields of activity, to
plan farther ahead.”
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10 Strategy Magazine
Lessons in
strategic
transformation
Companies able to transform have the unusual ability to change their success model prior to
financial decline. Support from the top means this ability is eventually institutionalised, as examples
from three top companies show. By Manuel Hensmans, Gerry Johnson and George S. Yip
F
ew companies can voluntarily make
the transformation from their old
success model to a new model.
Typically, they begin to shift gears and
search for a new way forward only when
they are pushed. The momentum of and
commitment to the prevailing strategy
usually leads to failure to spot changes
(such as either a shift in the market or
the technology) and leads to financial
downturn, often a crisis, that, in turn,
triggers the need for change.
Every decade has at least one prominent
example: IBM in the 1980s; General Motors,
Apple Computer and Marks & Spencer
in the 1990s; Dell, Nissan, Sony, RBS and
Nokia in the 2000s. The pattern is so
familiar that it has come to seem inevitable:
an admired and respected paragon of its
industry falters and runs into financial
crisis. Hero becomes zero. Shareholders
rebel, managers are sacked and ultimately
major change ensues.
This raises two important questions
for corporate managers. Firstly, is the
risk of decline inevitable? And secondly,
do companies really need a financial
downturn to galvanise change or can they
adopt new ways of doing things on their
own? Management theorists have observed
that decline, while perhaps not inevitable,
is at least very likely. For this reason, some
say it’s critical for organisations to develop
radically new capabilities rather than
relying on their historic capabilities.
To better understand how some
companies continue to perform at high
levels and modify their strategies over
time, we studied more than 200 of the
UK’s largest public companies. Some of the
consistent high performers (measured by,
among other things, profits and returns
on shareholders’ funds, and on total assets
over a 20-year period between 1984 and
2003) operated in relatively safe and stable
markets; such companies were therefore
mostly able to maintain high levels of
performance without making major
strategic changes.
Our goal, however, was to draw insights
from the small subset of high performers
that successfully transformed themselves.
Among other things, we wanted to
understand the role of history – for
example, which management processes
and capabilities companies should try to
develop over time and which capabilities
were less important.
We focused on three companies that had
made successful strategic transformations,
comparing them to three companies from
similar industries that were also successful
but hadn’t been required to make a dramatic
shift. The first pair, Cadbury Schweppes and
Unilever, are long-time leaders in packaged
goods, both with roots extending back to the
nineteenth century. The second pair, Tesco
and J. Sainsbury, are major players in the
UK’s supermarket industry and are among
the largest grocery retailers in the world.
The third pair, Smith & Nephew and SSL
International, operate globally in the medical
devices and related products markets.
Strategy Magazine
All six exhibited success factors of wellmanaged companies. Nevertheless, some
had combined strategic transformations
with achieving strong performance year
after year for 20 years relative to industry
peers around the world. The companies
that were able to successfully transform
themselves – Cadbury Schweppes,
Tesco, and Smith & Nephew – had three
fundamental advantages over their
peers. They were able to build alternative
coalitions with management; create a
tradition of constructive challenging to
business as usual; and exploit ‘happy
accidents’ to make strategic changes.
Together these advantages helped them
create the virtuous cycle of strategic
transformation that their comparators
could not.
“Is the risk of
decline inevitable?
Do companies really
need a financial
downturn to
galvanise change or
can they adopt new
ways of doing things
on their own?
11
“Alternative leaders were able to accelerate
the pace of transformation by leveraging ‘happy
accidents’ to gain a broad platform of support.”
Alternative coalitions
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with a discount of 25%. To order
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discount code WSPSMEMBER.
Many executives recognise the need for
exploiting current capabilities while
developing new ones. But few are very
effective at this dual, conflicting set of
activities.
Companies that transformed themselves
had an unusual ability to maintain steady
performance while pursuing strategic
change. They did this by creating parallel
coalitions of senior executives. The first
group, typically the more senior one,
focused on reinforcing current capabilities,
current strengths and current successes.
The second group, usually younger but
still senior, actively looked to develop new
strategies and new capabilities. This parallel
system came to be an accepted part of how
the company operated. It was encouraged
and eventually institutionalised. In
particular, the second group time and again
was able to anticipate problems that might
cause strategic drift; issues that would
make the company’s strategy increasingly
misaligned with a changing environment.
For instance, the original Tesco
model was to ‘pile it high, sell it cheap’,
which founder Jack Cohen perpetuated
through a personal command and
control management style. An alternative
coalition was created beginning in the
1960s to pursue more modern logistical
and operations practices. The new forces
introduced Tesco to a corporate model of
management control. During the 1970s,
the new coalition included an increasing
number of non-family members, who
were credited with modernising Tesco in
the 1980s and 1990s. Ian MacLaurin and
his team of operations-oriented managers
developed their ideas over many years,
and were ready to take charge once the
limitations of Cohen’s approach become
evident. They did away with the old
business model featuring reward stamps
when Cohen and his associates stepped
down at the end of the 1970s.
By contrast, Sainsbury’s was not able
to find a way to go beyond what had been
its established success formula during
the 1990s: store configurations that
helped maximise sales per square foot; an
emphasis on fresh produce; yearly growth
of 20%; family control; and a reliance on
the singular dominance of a CEO who
was widely acknowledged as an intuitive
retailer. While this recipe had served the
company well, the deeply entrenched
business model and management style
were difficult to change.
Of the three companies that made
successful transformations, none had to
reach outside the organisation for top
leadership. In a sense, they grew their own
‘outsiders’ by encouraging ‘intrapreneurial’
talent and giving individuals space to
comply with their formal job duties while
they experimented with and/or refined
their knowledge of alternative approaches
to business.
Constructive challenging
Most companies claim to encourage
challenges to business as usual or even to
the core tenets of the business model. It is
less clear how and whether they actually
do it.
At companies that achieved major
transformations, the development of
alternative coalitions frequently occurred
in the context of fundamental conflict.
At both Tesco and Smith & Nephew, the
conflicts were actually open. Tesco, for
example, had a boardroom battle between
family members and, later, between the
two coalitions of managers. At Smith &
Nephew, there was a major showdown
between the ‘textile traditionalists’ and
those who wanted to develop new business
ideas. At both companies, the conflicts
became less intense over time and more
respectful.
Constructive challenging at Cadbury
Schweppes had a much longer legacy.
Cadbury was founded in the early 1820s
by Quakers, and leaders had long been
keen to foster a corporate culture in
which “candour, freedom of speech … a
spirit of toleration and liberty … [were]
the dominant notes.” While this cultural
tradition was strong, the merger in 1969
with Schweppes reinforced it greatly. In a
way, the merger set off a clash of cultures.
While Schweppes people described
Cadbury as a company run by enterprising
‘choirboys’ and ‘teetotal’ Quakers, the
Cadbury side referred to Schweppes
as home to ‘gin-and-tonic-drinking
Londoners’, and people with a ‘short-term’
or ‘cowboy’ approach. Over time, the best of
both cultures rubbed off on each other, and
were integrated in the merged company.
At Unilever, by contrast, the internal
struggle that might have occurred with
the 1929 merger of Margarine Unie and
Lever Brothers was suppressed through
the development of a range of balancing
measures worked out between the Dutch
and British holding companies. One former
director said: “From the merger in 1929
our strategy has suffered from the need to
control the balance between the Dutch and
British sides of the business.” The ability
to collaborate and innovate internally
across corporate and business levels was
hampered by equalisation agreements
and silo-creating resource allocation
decisions – most notably about product and
geographical responsibilities.
Strategy Magazine
Significantly, alternative leaders were able
to accelerate the pace of transformation,
not by forcing the issue, but by leveraging
‘happy accidents’ to gain a broad platform
of support.
At Cadbury Schweppes, the poor
performance of the US confectionery
business triggered a hostile takeover bid
by General Cinema in 1987. Ultimately,
the takeover episode turned out to be a
happy accident. It resulted in an increase
in the share price, which generated money
for acquisitions and functioned as a
poison pill that allowed the Cadburys to
further refine their long-term focus. It also
spurred the chairman, Dominic Cadbury,
to accelerate the pace of transformation,
not just by divesting the food and hygiene
businesses but also by allowing alternative
leaders within Cadbury Schweppes the
opportunity to initiate exciting new
developments. These latter included the
Coca-Cola Schweppes Beverages joint
venture, the relocation of the beverages
headquarters from London to Stamford,
Connecticut, and the refocusing of the
confectionery division.
About the authors
Manuel Hensmans is a professor
of strategic management at Solvay
Traditions for transformation
Brussels School of Economics and
If companies are to sustain high
performance and transform their strategies,
they need to accept and foster alternative
management coalitions, and they also need
to see the value of constructive tension and
challenging. Although inventing a history of
constructive challenging is not possible, it is
feasible to shortcut the process by building
organisations that encourage alternative
management groupings and support a
culture of challenge and contestation.
Management at Université Libre de
Bruxelles in Belgium.
+32 2 650 6598
[email protected]
Gerry Johnson is an emeritus
professor of strategic management
at Lancaster University Management
School in the UK.
+44 (0)1524 592374
[email protected]
George S. Yip is a professor of
Happy accidents
management at China Europe
The two traditions of alternative coalitions
and constructive challenging were
historically embedded in the management
processes and behaviours of the successful
strategic transformers. These came naturally
to companies that made successful
strategic transformations; not only did
new ideas and alternative ideas continually
surface in these organisations, they were
aggressively pursued. Given the dynamics,
the companies were well-positioned
to turn problems into opportunities.
International Business School in
Shanghai and a visiting professor at
Imperial College Business School in
London.
+86 21 2890 5640
[email protected]
Together they are the authors of
Strategic Transformation – Changing
while Winning (Palgrave Macmillan
2013) and a related article in MIT
Sloan Management Review.
13
Think big,
think deep
Recent failures that led to the global economic crisis have exposed the
current business model as lacking. The necessary reforms require deep,
as well as different, thought. By Philip Whiteley and Neela Bettridge
F
or decades it has been observed
that many strategic plans fail; we
even know why. Studies on mergers
and acquisitions, for example, show that
fewer than half deliver the expected
returns. Cross-border and cross-cultural
mergers are particularly risky, and many
studies point to a neglect of matters such
as internal culture, skills retention and
employee engagement.
Despite this, it has been difficult to
apply some of the learning. An obvious
response is to challenge some of the
research findings; to what extent is strategic
management evidence-based may be a
more fundamental question. Are there any
flaws in our operating assumptions that
lead us astray? Are there taken-for-granted
“Some are reluctant to ask whether
the dominant business model
actively undermined
interdependence.”
assumptions in the twentieth century MBA
and its legacy that are profoundly flawed
and which were never based on evidence?
Recent corporate crises are more than
just a few cases of poor judgement or bad
luck. Conceptual errors in the common
way of understanding business demand
a fundamental renewal of the business
model. A new philosophy, not just a
new business model, is needed. So far,
recognition of this is patchy.
Out with the old
The new approach of ‘creating shared
value’, championed by Michael Porter and
others (for example in a Harvard Business
Review article in January 2011) marks a
significant shift, identifying the importance
of the inter-dependence of different
constituencies in making an enterprise
resilient and successful.
There is, however, a tendency to baulk
at the implications. Some are reluctant
to ask whether the dominant business
model of the late twentieth/early twentyfirst century actively undermined
interdependence by prioritising short-term
profit maximisation, by exaggerating the
difference in interests of executives to the
shareholders, and reducing the people
who actually comprise the organisation to
mere cost units or ‘human resources’. The
‘old’ business model also assumed natural
resources to be effectively infinite in supply.
In short, there is a danger that the
learning will be superficial, and old
habits will resurface, with a token
attempt at ‘shared value’ grafted on to
a business model that is still measured
by accountancy, obsessed with the next
quarter’s earnings and all but completely
disregarding the environment upon which
we all depend. We have to root out the bad
ideas as well as promote the good.
There is a similar pattern in economics.
Behavioural economics has begun to be
accepted, especially in the investment
field, as enabling a better understanding
of phenomena that lead to the creation of
asset price bubbles, such as groupthink and
irrational exuberance. There is, however,
a tendency to assume that economics is
only ‘a bit’ behavioural, and that it is still
Strategy Magazine
acceptable to pore over fiscal and monetary
data, making projections based on statistics,
lacking real insight into the investment,
skills, judgement and leadership that
are necessary for sustainable economic
development.
In business there is growing awareness
of the role of human capital and strategic
talent management, but still a tendency to
refer to ‘the people side’ of a business, and
treat it separately from strategy. Cultural
due diligence is nearly always missing
when planning a merger, but cultural
clashes are nearly always the reasons for
merger failure.
A more radical shift is needed:
the recognition that economies and
organisations consist of people, not
resources, or ‘market forces’. This doesn’t
make strategic management easy, but
does place it in the real world. Behavioural
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a Sustainable Future is published
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It is available to all SPS Members
with a discount of 25%. To order
visit www.gowerpublishing.com
and use discount code G11FDH25.
Six principles of ‘the new normal’
1. T
he twentieth century business model was
based on economic theory, not evidence on
how businesses operate – formal economics
has used mechanistic metaphors for the
economy and the organisation, assuming ‘the
firm’ or ‘labour’ to operate according to ‘laws’.
The importance of leadership skills has been
downplayed. Wages are described as the cost
of labour in economics, but in the real world
they can be dwarfed by the costs of poor skills
or low morale.
2. Accountancy cannot measure the organisation
– use of accountancy to value organisations
has led to the misnomer that the people who
work for the company and their skills are
‘intangible’, whereas in fact they exist; and the
misnomer that the assets owned by the legal
entity of the firm are ‘tangible’, even though
they consist of relative valuations expressed
on a balance sheet.
3. T
he company is a network of teams, not a
structure with resources – a business is based
on relationships, not impersonal transactions.
Business leadership means negotiating with,
leading and challenging or inspiring people.
4. Sustainability is a business necessity, not
an ethical extra – the business costs of
opportunistic, unethical pursuit of shortterm returns have been huge: mis-selling,
fraud, Libor-rigging and so on have damaged
and even destroyed entire businesses.
Environmentally, finite natural resources
mean that responsible and efficient
stewardship is now a business imperative.
5. S
hareholders do not own a publicly listed
company – recent business orthodoxy has
been geared towards maximising returns for
shareholders, who are assumed to be the
‘owners’ of the company. But shareholders do
not own the company; they own shares in the
company, and benefit from limited
liability. The duty of the directors is
the long-term stewardship of the
company.
6. L
eft–right politics is an
anachronism – economic theories
of left and right-wing politics
agree that the interests of owners
and workers are always inherently
opposed. This can be found in the
teachings of Karl Marx and Milton
Friedman, which have been hugely
influential. Decades of research on
employee engagement now show
this assumption to be inaccurate
and extremely damaging to
businesses and their employees.
15
About the authors
Philip Whiteley is an author and
journalist, specialising in the
working environment and business
performance. He has made
numerous contributions to The
economics is the only kind there is because
all economic data is only ever a by-product
of economic decisions made by individuals
and groups of people. In an organisation,
there is no such thing as a ‘structure’ that
really exists – such a concept is a metaphor
that may or may not help, but in the final
analysis your strategic goals, customer
service and investor relations, and all the
strategic and tactical decisions made, are
carried out by people. Relationships are
not ‘the soft stuff’, they are the means by
which business gets done. All the best-run
organisations understand this, but their
example is often copied in a superficial way.
Times, Personnel Today, Director and
other business titles, and is editor-
Detrimental dominance
in-chief of Payroll World. He is a
The dominance of accountancy poses
a significant problem. It is commonly
assumed that advanced accountancy allows
measurement of cost, and that businesses
should strive to reduce this cost. The reality,
however, is that the accountancy metrics
often used to plan restructurings such as
outsourcing and mergers measure only
direct expenses, not actual operating costs.
So a reduced wage cost does not necessarily
result in lower operating costs. Hence
business planners often overlook the costs
of high staff turnover; weak skills, poor
morale. These may be hidden, but they can
be huge.
For example, Mike Barry, who works
at the UK-based retail company Marks &
Spencer, found that increasing the wages
in Bangladeshi clothing suppliers actually
improved profit margins, because increased
earnings were combined with improved
training and career prospects, leading to
higher morale, stronger skills and lower
staff turnover.
The dominance of accountancy also
treats assets owned by the company as
member of the Society of Authors,
a Subject Matter Expert for the
Chartered Management Institute
and is a fluent speaker of Spanish.
+44 (0)7951 601575
[email protected]
Neela Bettridge is a coach and
mentor to senior individuals and
teams, helping them operate
effectively at a senior position and
nurturing their personal leadership
skills. She is also an advisor to
boards and other senior teams on
sustainability both in the corporate
and non-profit sector.
+44 (0)20 8799 5774
[email protected]
Their book, New Normal, Radical
Shift: Changing Business and
Politics for a Sustainable Future
(Gower Publishing, 2013), explores
the issues raised in this story at
greater length.
‘tangible’, and people-related elements as
‘intangible’. This is completely the wrong
way around. The valuation of a factory,
or land, or mining rights is a subjective
valuation on the balance sheet. But the
people who come to work for the firm each
day also exist: there is nothing ‘intangible’
about them, and if they are not treated
well, this could hurt the business. These
misnomers can cause major errors when it
comes to strategic planning.
Critics of this new approach may point
to low-wage operations, for example in
China. The reasons why such examples do
not undermine this argument are complex.
First of all, lower wages can provide an
advantage, but probably only temporarily.
Risks, such as weak skills and staff
retention, must also be considered.
Moreover, this may just be a case of
correlation, not cause and effect, and better
wages might actually increase profitability,
as Marks & Spencer found. Wages in rapidly
developing economies are often low by
international standards but relatively high
in regional terms, and are appealing, for
example, to peasant farmers deserting the
countryside.
The novelty of this regular wage can
soon wear off. Industrial relations and skills
retention problems are now starting to
emerge in China, for instance, as the supply
of migrants from the countryside starts to
slow. There have been reports of increased
staff turnover and even worker suicides.
What appeared to be an advantage of low
cost may really have been an advantage
of high motivation, but this may now be
declining. A comparable pattern was seen
in the UK, which industrialised in a similar
manner over a century earlier, but later
suffered crises caused by poor industrial
relations.
Antagonistic assumptions
One of the most baleful influences on
organisational management is that of
left–right politics. The left-wing theories of
Karl Marx, which influence trade unions,
and classical right-wing economists, who
have influenced employers’ groups, argue
that the employer-employee relationship
is a zero-sum game: that the more the
worker gains, it must be at the expense
of the owner. This belief is so deeply
ingrained that it is hardly surprising to
find it lurking within operational and
strategic management. The radical shift
required is to regard business results
depending on relationships of customers
with the business’s teams. In this way, it
becomes possible to understand that wages
and profits can both rise in line with the
customer experience.
The new normal encourages leaders
to develop an understanding of all their
stakeholders. It doesn’t mean being able to
say ‘yes’ every time – difficult decisions will
always be a part of the senior management
role. But it is possible to develop a
better understanding of how the wider
community that is ‘the firm’ operates, and
how cooperation brings the best results.
Similarly, on the environment, it is
commonly assumed that the business
interest and the environmental interest
are diametrically opposed. Stephen
Moorhouse, vice president of Coca-Cola
Enterprises, told a sustainability conference
in September 2012 that, despite six years of
growth and consistent reduction in carbon
emissions, he still gets asked how it is
possible to combine business success with
environmental protection.
Corporations are often accused of
‘green-washing’ – using token gestures
of kindness to the environment as part
Strategy Magazine
“Business planners often
overlook the costs of high
staff turnover; weak skills,
poor morale. These may be
hidden, but they can be huge.”
of a PR exercise, assuming that it is in
the business interest to continue to
externalise pollutions costs or plunder
natural resources. More enlightened
thinking involves asking if it is in the
business’s interest to be environmentally
wasteful. Externalising pollution costs may
simultaneously cut down on business costs
because energy, transport or raw materials
are used more efficiently. A radical shift
from ‘supply chain’ to ‘supply circle’ means
moving from the old normal ‘take-makewaste’ to the new normal ‘borrow-usereturn’, to use the memorable words of Bob
Willard.
The old normal way of doing things is
not fit for purpose. It is based on a latemediaeval measurement system (doubleentry book-keeping), zero-sum economic
theories from the eighteenth and the
nineteenth centuries that we now know to
be inaccurate, and a tacit assumption that
natural resources are infinite in supply.
There has to be a better way and there is no
choice but to find it.
“There has to be a
better way and there
is no choice but to
find it.
17
Customercentric survival
At a time when every customer can empower decision-making with a
smartphone, and when price comparison is just a click away, becoming
more customer-centric is vital. Only a well-executed and actionable
strategy can ensure survival in this new reality. By Lior Arussy
E
“A customer-centric
strategy treats the
customer as a plant
that should be
nurtured.
very organisation wants to become
more customer-centric – it is
included in every mission statement.
Yet mission statements do not implement
themselves.
But relatively few companies take
customer centricity seriously, though often
not for lack of trying. Companies may
diligently post the customer commitment
policy on the office wall but fail to instil
its content into the heart and soul of
employees.
Part of the problem may be a lack of
clarity about what a customer-centric
strategy is. It should be a roadmap to align
the whole organisation in the direction
of designing products and services that
centre on the customer’s needs, wishes and
aspirations. The strategy must place the
customer at the centre of all decisions.
A product-centric strategy treats the
customer as an orange that should be
squeezed for all it has and then thrown
away. A customer-centric strategy, on the
other hand, treats the customer as a plant
that should be nurtured to ultimately
create more value. Effective customer
strategies deliver customers who pay a
premium price and show greater brand
loyalty. In short, a customer-centric strategy
is the path to greater profitability.
Today’s customer no longer looks for
organisations to meet their needs, seeking
instead memorable experiences: they
demand that their expectations not only be
met, but exceeded. This is a new standard
of performance that most companies fail
to recognise. As a result, they continue to
operate on the old product-centric model.
Living in the past in this way is
increasingly perilous: customers no longer
compare companies to others within
the industry, but look to the ‘best of the
world’ brands. An enjoyable experience
at a hotel, an amusement park or a coffee
shop becomes the baseline of customer
service expectation. Customers of local
banks, for instance, expect a similar level
of commitment and empathy. Thus,
customer centricity is no longer an option
but, in the mind of customers, a given.
Customers reward companies based on
that commitment.
The financials are clear: a 2010 study
identified that 73% of customers would
increase their purchases with a vendor by
10% or more if the customer experience was
superior and 44% would be willing to pay a
premium price of 5% or more for a superior
customer experience. A study of customer
experience leaders versus customer
experience laggards shows that investing
in customer experience leaders over a fiveyear period results in 22.5% above market
performance, while customer experience
laggards’ stocks perform 46% below market
average. So why are companies getting their
approach to service so wrong?
Tactical versus strategic
There are two types of customer-centric
approach: tactical and strategic. A tactical
customer-centric approach focuses on
fixing customer ‘dissatisfiers’. The main
outcome of these ‘below-the-line’ efforts is
usually a reduction in costs associated with
complaints.
Strategy Magazine
A strategic approach does include
measures to remove dissatisfaction. But it
also creates excellence and a clear service
differentiation, resulting in customer
loyalty.
Organisations taking a tactical approach
but expecting the results of a strategic
approach will be disappointed.
In a Strativity 2013 Corporate Love
Meter study of companies’ intentions, 50%
of executives declared their commitment
to pleasing customers with new and
exceptional experiences. Only 24% of the
managers working with these business
leaders shared the same commitment.
Overcoming the obstacles
Organisations, despite their inspiring mission statements, fail to capture the full opportunity presented by
the customer-centric strategy for a multitude of reasons. Those seeking to transform from product or process
centricity to customer centricity face built in, persistent obstacles that must be recognised and addressed.
’We are doing it already’. The number one
enemy to customer centricity is not a lack of
internal buy-in but rather the conviction that it
is being done already. In reality, as long as your
customer requests discounts, they have failed
to see your relevant value and as such will not
be willing to pay for it. As illustrated by
Strativity’s multi-year study, while many
employees believe that they act with common
sense or exceed customer expectations, only a
minority of their customers agree that this is
the case (see figure 1).
L
ack of business case. Customer centricity is a
strategy and as such needs to be based on a
strong business case. Operating on a less
strong, ‘common sense’ approach is a mistake
that leads to a lack of proper commitment,
resourcing and funding.
S
iloed information, siloed organisation. Ask
several executives what customers want and
answers will differ depending on where they are
located in the organisation. Siloed organisations
create fragmented views of the customer and
thereby fail to build a true picture.
The
technology shortcut. Instead of
addressing the strategic issues, companies
purchase a technology toy that they were
promised would make the problem go away.
Technology can go some way to solving some
problems but does not replace a solid
understanding of and relationship with the
customer. A fool with a tool is still a fool.
S
iloed measurements. Every function
in the organisation has its own metric
to which they perform. Very often
there is no unifying measurement
that ties and incentivises everyone to
work together.
P
eople. Consistency is critical to
every strategy execution. Yet the
biggest variance factor is people:
they do not act consistently, partly
because the end game may be
unclear to them or they do not know
how to act. Sometimes it is because
they simply do not care. No strategy
execution will attain its goals until
this variance factor is addressed.
19
“Committing to incremental efforts and
expecting order of magnitude results
is delusional at best.”
In fact, 51% of the managers surveyed
focused their efforts on a ‘no change’
approach. While executives declared
commitment to creating exceptional
experiences, managers at the lower level
of the organisation were content to
deliver ‘business as usual’ performance.
Committing to incremental efforts
and expecting order of magnitude results
is delusional at best. True customercentric strategies are transformational by
nature. CEO-level commitment is needed
for efforts that will uproot lacklustre
behaviour and plant new seeds of
dedication and empathy for the customer.
Can such DNA transformation actually
be achieved? Real-life experience suggests
that it can: a European logistics company
with over 9,000 employees was able to
transform itself from 3% to 44% organic
growth in just 24 months by refocusing
the organisation on a customer-centric
strategy.
Inspiring evolution
Everybody likes change as long as it does
not apply to them. Research shows that
people are still reluctant to change even
when incentives are clear. For example,
only one out of ten people who have
suffered from a heart attack will stick to
the diet and exercise regime prescribed to
them six months after the event.
Change does not have to be hard. The
key to effective change management is a
vision of a brighter future. Most change
programmes point to faulty historical
behaviour and paint the past as flawed
and wrong. This approach can make the
future look like a difficult mountain we
have to climb – not a great narrative.
Designing and executing customer
strategies should have a narrative about
celebrating a brighter future. The focus
must be on the privilege of being part
of customers’ lives in a moment of need
and the power to make a difference in
Figure 1: Going above and beyond
100%
Employees
75%
50%
Customers
25%
0
“I often go above and
beyond”
“I use common sense and
discretion in my work”
Source : EGA study, 50,934 participants, Strativity Group 2004–13
their lives. Change is no longer about an
unsatisfactory past; it is about the bright
future that we all need to pursue together.
Critical components to effective change
management programmes are:
Design
and define a bright future that
connects to customers’ lives, not
stockholders value.
M
ake the effort personal to every
employee. Create a connection and line
of sight between the employee, their
work and the impact they have on the
customer.
Position
change as pioneering, not fixing
the past. Communicate a message of
upgrade and evolution.
Identify
what is holding employees back
from achieving the new vision and
remove the obstacles.
Effective change management must
combine an emotional component (the
privilege to make a difference) with a
rational component (removing obstructive
processes and providing empowerment) so
that the required change will be possible
in the eyes of the employees. Effective
customer-centric strategies are highly
dependent on employees – employees who
are there to exceed customer expectations.
Every organisation is the sum total of the
daily decisions made by its workforce,
whether these decisions delight customers
or merely deliver an average performance.
It is these decisions that develop and grow
brands and profitability.
The focus of every effective strategy
must be on understanding, inspiring,
empowering and sustaining employees’
commitment. Unfortunately, many
organisations spend their efforts and
resources on communications campaigns
that make lofty promises to customers
(and heighten their expectations in
the process) without investing in the
Strategy Magazine
actual execution of the promises they
communicate. Successful customer-centric
strategies focus on the execution element
and then communicate it.
The late Margaret Thatcher once said if
you claim you are a lady, you are probably
not. A true lady will be recognised
naturally. The same principle applies to
business. If you need to claim in your
mission statement that you are customer
centric, you probably are not. True
customer-centric companies are naturally
evident through their actions, customer
loyalty and profitability.
About the author
Lior Arussy is the president of
Strativity Group, a global customer
experience transformation firm. His
most recent book is Exceptionalize
It! (4i, 2012).
[email protected]
@LiorStrativity
21
Playing to win
Winning should be at the heart of any strategy. A strategy is
a coordinated and integrated set of choices that make up the
strategic choice cascade as the successful re-launch of
a flagging brand shows. By A.G. Lafley and Roger Martin
S
trategy is choice. More specifically,
strategy is an integrated set of
choices that uniquely positions
the firm in its industry so as to create
sustainable advantage and superior value
relative to the competition: a winning
aspiration, where to play, how to win, core
capabilities, and management systems.
This approach grew out of the strategy
practice at Monitor Company, subsequently
became the standard process at P&G,
and has since been powerfully used in
all manner of industries and all sizes of
organisations, including start-ups, notfor-profits, and government agencies. An
examination of the roots of this strategy is
informative.
Rethinking Olay
About the authors
A.G. Lafley is the former chairman of
the board, president, and CEO of Procter
& Gamble. Under Lafley’s leadership,
sales doubled, profits quadrupled, and
the company’s market value increased by
more than $100 billion.
Roger Martin is dean of the University
of Toronto’s Rotman School of
Management. In 2011, Roger was named
by Thinkers50 amongst the world’s top
ten management thinkers.
[email protected]
By the late 1990s P&G had decided to focus
on skincare. Skincare (including soaps,
cleansers, moisturisers, lotions, and other
treatments) constitutes about a quarter
of the total beauty industry and has the
potential to be highly profitable. One P&G
product in particular, Oil of Olay, was
struggling. The brand had baggage: Oil of
Olay was seen as old-fashioned and no
longer relevant.
Derisively called Oil of Old Lady, its
customer base was growing older every
year. Women were passing over Oil of
Olay and its core product (pink cream in a
simple plastic bottle), sold at the bargainbasement price of $3.99. By the late 1990s,
Oil of Olay sales were clocking in below
$800 million a year, nowhere close to the
industry leaders in the $50 billion skincare
category. The plan was to remake Oil of
Olay – its brand, its business model, its
package and product, its value proposition,
and even its name. Out went ‘Oil of’, and
the brand was rechristened ‘Olay’.
Led by Gina Drosos, then-general
manager for the skincare business, the team
set to work to understand Olay’s consumers
and its competition. Conventional wisdom
was that the most attractive consumer
segment was women aged over 50 and
concerned with fighting wrinkles, and
this was where the leading brands tended
to focus. But, Drosos recalls: “We found
that there was real growth potential with
consumers who were more than 35, when
they noticed their first lines and wrinkles.”
The mid-thirties seemed to be a potential
point of entry in women’s skincare. At this
age, consumers become more committed
to skincare, and are more willing to pay for
quality and innovation.
Traditionally, department store beauty
brands have taken the lead on innovation,
developing better products that trickle
down to the mass market. Given P&G’s
considerable in-house R&D capabilities,
there was an opportunity to lead on
innovation from the middle of the market.
Joe Listro, Olay’s R&D vice president, notes,
“Besides wrinkles, there were dry skin,
age spots, and uneven skin tone problems.
Consumers were telling us: ‘We have these
other needs’.”
Olay sought to redefine what anti-aging
products could do. The result was a series
Strategy Magazine 23
of new products, beginning with Olay Total
Effects in 1999, that combined consumer
insights with better active ingredients to
fight the multiple signs of aging.
Channelling success
The new, more effective products could
credibly be sold in department stores,
a ‘prestige channel’ that accounted for
more than half of the market. But Olay
had traditionally been sold only in the
mass channel, through chemists and
supermarkets. To play to P&G’s strengths,
it made sense to stay in mass channels, but
only if department store consumers would
defect there for Olay.
To win with Olay in mass, the company
had to bridge the mass and prestige
markets, creating what it would come
to call a ‘masstige’ category, and shift
the perception of beauty care in the
mass channel, selling higher-end, more
prestigious products in a traditionally highvolume environment. It began with adverts
highlighting Olay as the way to fight ‘the
seven signs of aging’. Independent tests
showed Olay products performing better
than brands costing hundreds of dollars
more.
The team then redesigned the packaging
to look impressive on the shelf. Pricing
was final element. Its pricing needed to hit
the perfect note – not so high that mass
consumers would be turned off, but not so
low that prestige consumers would doubt
its efficacy. At $12.99, there was a positive
response, but only among mass shoppers,
while $15.99 was no-man’s-land; way too
expensive for a mass shopper and still not
really credible for a prestige shopper. Then,
at $18.99, purchase intent went back up
again – way up. At $18.99, Olay Total Effects
was great value to a prestige shopper who
was used to spending $30 or more.
Momentum started to build. Olay
followed up with a series of even more
expensive premium brands. For most of
the 1990s, P&G’s skincare business had
grown at 2–4% per year. Following the
2000 re-launch, Olay had double-digit sales
and profit growth every year for the next
decade. The result: a $2.5 billion brand with
extremely high margins and a consumer
base squarely in the heart of the most
attractive part of the market.
“The company had to bridge
the mass and prestige markets,
creating what it would come to
call a ‘masstige’ category.”
What strategy is
Why did Olay succeed spectacularly where
so many fail? They had a clear and defined
approach to strategy, a thinking process
that enabled individual managers to
effectively make clearer and harder choices.
Strategy can seem mystical and
mysterious. It isn’t. Strategy is easily
defined as a set of choices about winning.
Again, it is an integrated set of choices that
uniquely positions the firm in its industry
so as to create sustainable advantage and
superior value relative to the competition.
Specifically, strategy is the answer to the
five interrelated questions illustrated in
figure 1.
These choices and the relationship
between them can be understood as a
reinforcing cascade, with the choices at
the top of the cascade setting the context
for the choices below, and choices at the
bottom influencing and refining the
choices above.
Figure 1: An integrated cascade of choices
What is our
winning
aspiration?
The purpose
of the enterprise:
O
ur guiding
aspirations
The right playing field:
W
here we will compete: our geographies,
product categories, consumer segments,
channels, vertical stages of production
Where will
we play?
How will
we win?
The unique right to win:
O
ur value proposition
O
ur competitive advantage
The set of capabilities required to win:
O
ur reinforcing activities
O
ur specific configuration
What capabilities
must be
in place?
What management
systems are
required?
The support
systems:
S
ystems, structures, and measures
required to support our choices
“A company that doesn’t seek to
win is wasting the time of its
people and the investments
of its capital providers.”
In a small organisation, there may well
be a single choice cascade that defines the
set of choices for the entire organisation.
But in larger companies, there are multiple
levels of choices and interconnected
cascades. At P&G, for instance, there is a
brand-level strategy that articulates the
five choices for a brand such as Olay or
Pampers. There is a category strategy that
covers multiple related brands, like skincare
or nappies. There is a sector strategy that
covers multiple categories, for example,
beauty or baby care. And finally, there is
a strategy at the company level, too. Each
strategy influences and is influenced by the
choices above and below it. The result is a
set of nested cascades that cover the full
organisation (see figure 2).
Winning aspirations
The first question – what is our winning
aspiration? – frames all the other choices. A
company must seek to win in a particular
place and in a particular way. A company
that doesn’t seek to win is wasting the time
of its people and the investments of its
capital providers.
At Olay, the winning aspirations were
defined as market share leadership in
North America, $1 billion in sales, and a
global share that put the brand among
the market leaders. Establishing and
maintaining leadership of a new masstige
segment, positioned between mass and
prestige, was a further aspiration. This set
of aspirations served as a starting point
to define where to play and how to win,
enabling the Olay team to see the larger
purpose in what it was doing. Clarity about
the winning aspirations meant that actions
at the brand, category, sector, and company
level were directed at delivering against
that ideal.
P&G’s statement of purpose at the time
stressed improving consumers’ lives to
drive leadership sales, profit, and value
creation as the company’s most important
aspiration. This drove all subsequent
choices.
Figure 2: Nested choice cascades
Corporate-level
cascade
Winning
aspiration
Where to play
How to win
Strategic group
cascade
Winning
aspiration
Capabilities
Management
Systems
Where to play
How to win
Individual
business cascade
Winning
aspiration
Capabilities
Management
Systems
Where to play
How to win
Capabilities
Management
Systems
Strategy Magazine 25
Aspirations can be refined and revised
over time but shouldn’t change day to day:
they exist to consistently align activities
within the firm so should be designed to
last for some time.
Choosing the game
Where to play represents the set of choices
that narrow the competitive field. The
questions to be asked focus on where the
company will compete – in which markets,
with which customers and consumers,
in which channels, in which product
categories, and at which vertical stage or
stages of the industry in question. This set
of questions is vital; no company can be
all things to all people and still win. These
choices, when taken together, capture the
strategic playing field for the firm.
Olay made two strategically decisive
where to play choices: to create, with
retail partners, a new masstige segment
in supermarkets and chemists to compete
with prestige brands and to develop a new
and growing point-of-entry consumer
segment for anti-ageing skincare products.
Many other where to play options were
considered (like moving into prestige
channels and selling through department
and specialist stores), but to win, Olay’s
choices on where to play needed to make
sense in light of P&G’s company-level
where to play choices and capabilities.
Where to play selects the playing field;
how to win defines the choices for winning
on that field. It is the recipe for success in
the chosen segments, categories, channels,
geographies, and so on. To be successful,
how to win choices should be suited to
the specific context of the firm in question
and highly difficult for competitors to
copy. P&G’s competitive advantages are its
ability to understand its core consumers
and to create differentiated brands. It wins
by relentlessly building its brands and
through innovative product technology.
The key to making the right choices for
your business is that they must be doable
and decisive for you.
Two questions flow from and support
the heart of strategy. Firstly, what
capabilities must be in place to win, and
secondly what management systems are
required to support the strategic choices?
The first of these questions, the capabilities
choice, relates to the range and quality of
activities that will enable a company to win
where it chooses to play.
At P&G, a company with more than
125,000 employees worldwide, the range of
capabilities is broad and diverse. But only a
few capabilities are absolutely fundamental
to winning in the places and manner that it
has chosen:
D
eep consumer understanding. The goal
is to uncover the unarticulated needs of
consumers, to see opportunities before
they are obvious to any competitors.
I nnovation. P&G seeks to translate deep
understanding of consumer needs into
new and continuously improved
products. Innovation efforts may be
applied to the product, to the packaging,
to the way P&G serves its consumers and
works with its trade customers, or even to
its business models and management
systems.
B
rand building. Branding has long been
one of P&G’s strongest capabilities and it
works to train and develop brand leaders
and marketers in this discipline
effectively and efficiently.
G
o-to-market ability. P&G thrives on
reaching its customers and consumers at
the right time, in the right place, in the
right way. By investing in unique
partnerships with retailers, P&G can
create new and breakthrough go-tomarket strategies that allow it to deliver
more value to consumers in the store and
to retailers throughout the supply chain.
G
lobal scale. Rather than operate in
distinct silos, P&G categories can increase
the power of the whole. In the 1990s, P&G
amalgamated a whole suite of internal
support services, like employee services
and IT, under one umbrella – global
business services (GBS) – to allow it to
capture the scale benefits of those
functions globally.
These five core capabilities support and
reinforce one another and, taken together,
set P&G apart. A great new idea coming out
of the P&G labs can be effectively branded
and sold around the world in the best retail
outlets in each market. Competitors will
struggle to match that combination.
The final strategic choice in the cascade
focuses on management systems, the
“No company can
be all things to all
people and still win.
systems that foster, support, and measure
the strategy. These must be purposefully
designed to support the choices and
capabilities to be truly effective. The
systems need to ensure that choices are
communicated to the whole company, that
employees are trained to deliver on choices
and leverage capabilities, that plans are
made to invest in and sustain capabilities
over time, and that the efficacy of the
choices and progress toward aspirations are
measured.
Beneath Olay’s choices and capabilities,
the team built supporting systems and
measures, and detailed tracking systems
to measure consumer responses to brand,
package, product lines, and every other
element of the marketing mix. Olay
organised around innovation, creating a
structure wherein one team was working
on the strategy and rollout of current
products while another was designing the
next generation. It developed technical
marketers; individuals with expertise in
R&D as well as marketing, who could speak
“Strategy needn’t be the purview
of a small set of experts: it can
be demystified into a set of five
important questions.”
credibly to dermatologists and beauty
editors. It created systems to partner with
leading design firms, to create Olay displays
that were eye-catching and inviting to
shoppers. It also leveraged P&G systems
like global purchasing, the global market
development organisation (MDO), and GBS
so that individuals on the skincare and Olay
teams were freed up to focus where they
added the most value.
At the corporate level, management
systems included strategy dialogues,
innovation programme reviews, brand
equity reviews, budget and operating
plan discussions, and talent assessment
development reviews. All of these
systems were tightly integrated, mutually
reinforcing, and crucial to winning.
Olay succeeded because its integrated
set of five strategic choices fit with the
choices of the corporate parent. These
reinforced category-, sector- and companylevel choices so succeeding at the Olay
brand level actually helped deliver on the
strategies above it.
Strategy needn’t be the purview of a
small set of experts: it can be demystified
into a set of five important questions that
can (and should) be asked at every level of
the business. Creating a shared
understanding of a company’s strategy and
what must be done to achieve it is as simple
as this strategic choice cascade.
Looking for
bright ideas
in content
marketing?
Contact Andrew Rogerson
on 020 7434 1445
or [email protected]
www.gristonline.com
www.sps.org.uk

strategy - Strategic Planning Society

Transcription

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